12/16/2015

Russian Art Market Troubles

Bloomberg Business recently ran an interesting article on the floundering Russian art market. The article notes the recent Russian sales in London, perhaps the strongest location for Russian art sold only $25.9 million the lowest since 2007 and a 58% decline from the London 2014 sales. The article notes the market is getting smaller with fewer collectors. The article also notes that many buyers from 10-15 years ago are now becoming sellers.

I made a short post on this about a week ago, but this Bloomberg Business article has more details and depth. An interesting read for appraisers.

Bloomberg Business reports

Plunging oil sent jitters through markets for high-yield bonds and energy stocks. Another casualty: Russian art.

The latest Russian art sales at four London auction houses tallied 17.2 million pounds ($25.9 million) earlier this month, the lowest in records dating to 2007 and a 58 percent drop from a year ago, according to RussianArtandCulture.com. Christie’s is ending standalone sales of Russian art in New York, the company said, and Mark Moehrke is leaving as head of its Russian works of art department, according to a person with knowledge of the matter.

“The market has shrunk, I am afraid,” said William MacDougall, whose London-based MacDougall’s specializes in Russian art. “Russian collectors are not buying as much as they were a year or two ago.”

The Russian economy has been battered by a slump of more than 60 percent in the price of oil in the past two years, as well as international sanctions following the country’s annexation of the Crimea region of Ukraine. That’s chipped away at the wealth of the millionaires and billionaires who are among the biggest buyers of Russian art.

While that segment is a niche, a retreat by Russian buyers could also hurt sales of Impressionist, modern, postwar and contemporary auctions, and indicate a softening in the broader art market.

“Great things are still finding buyers, but the situation in Russia is frozen,” said Sonya Bekkerman, former head of Sotheby’s Russian painting department in New York, who left in 2013. “People are concerned about their businesses and the economy.”

Economic Toll
Russia’s gross domestic product contracted 4.1 percent in the third quarter. Crude oil prices have plunged by almost two-thirds from their high point last year. The ruble is down more than 50 percent against the dollar.

“I had one rather wealthy Russian client in recently and he said, ‘I feel poor because of the sanctions,”’ said Peter Schaffer, co-owner of A La Vieille Russie, an antique store on Fifth Avenue. “A lot of it is a mental state, not a physical state. This particular gentleman could buy most of Manhattan.”

Russian auctions at Sotheby’s and Christie’s in New York were once blockbuster events that drew the super rich from Moscow. Christie’s first offered Russian art as a standalone category in New York in 2006, the year Moehrke joined the company, tallying $9.2 million. The next year, results more than doubled to $19.3 million.

After New York sales declined, Christie’s moved its Russian painting auctions to London in 2012. In May, the company combined Russian decorative art with silver and small objects made of precious materials.

After a strategic review of its Russian artworks department, Christie’s decided to “consolidate its specialist expertise in London, where market activity for this category is currently most active,” the company said in an e-mailed statement.

London Consolidation
Moehrke has driven Christie’s strategy for its sales of Faberge and other Russian works, according to his LinkedIn profile. The person who said he plans to leave the company asked for anonymity because the information isn’t public. Moehrke and Christie’s declined to comment on the move.

Sotheby’s, which used to hold two Russian art seasons a year in New York, hasn’t had a standalone auction in the category there since April 2013, also consolidating its activity in London instead.

“If the challenges outweigh the revenue then it doesn’t make sense,” Bekkerman said. “In this business you have to be nimble. We continued to send great things from America to London.”

New York presents hurdles, including travel and shipping logistics.

“I was able to create something because there was so much Russian art in America,” Bekkerman said. “I was able to discover masterpiece after masterpiece. They were coming out of people’s closets. It was about the repatriation. People felt they wanted to collect their own culture.”
Discerning Collectors

The situation is different now. Many buyers who were active from 2003 to 2007 have become sellers, said Vladimir Ovcharenko, owner of Moscow’s Regina Gallery and founder of the Vladey auction house. Collectors still stretch for elite works, but they’ve grown more averse to aggressive estimates and subpar quality.

Auctions in London, the heart of Russian art trade, are down 82 percent from the peak in late 2007, when 96.6 million pounds of paintings and decorative objects sold at Christie’s, Sotheby’s, Bonhams and MacDougall’s, according to a report by RussianArtandCulture.com.

The top lot in London this month was Abram Arkhipov’s 1922 painting of a beaming peasant woman in a red dress. It sold for 905,000 pounds at Sotheby’s, almost four times its high estimate. The artist’s smaller, somber painting of a bearded man, estimated at 4,000 pounds to 6,000 pounds, failed to sell.

“Right now people are buying either masterpieces or emerging art,” Ovcharenko said in a telephone interview. “The middle is suffering.”

Fewer masterpieces are consigned to Russian art auctions because sellers are afraid, Elena Kuprina-Lyakhovich, a Moscow art dealer, said in a telephone interview.

‘Unstable’ World
“The world feels unstable,” she said. “No one knows how things will look four months from now.”
There are signs of life at the market’s lower end.

Vladey auction house said it sold 940,000 euros ($1.03 million) of contemporary paintings on Dec. 1, up 15 percent from the similar auction in May. Individual prices didn’t exceed 100,000 euros and about 90 percent of buyers were Russian.

“We are seeing a new generation of collectors who are comfortable spending 10,000 euros on an artwork,” Ovcharenko said. “The Russian art market has potential. When it will be realized, I can’t say.”

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The Appraiser Workshops blog was developed in 2008 to publish news connected with the personal property profession and to promote the Appraiser Workshops. Content includes appraisal ideas and tips, industry news and events, market trends and updates, surveys, educational opportunities and general commentary about personal property appraising. Visit often. Comments, news, suggestions and content contributions are always welcome.

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Todd W. Sigety, is a certified member of the International Society of Appraisers and is a partner in the Appraiser Workshop, developers of the Good, Better, "Best" Appraiser Workshop. He owns two Antique galleries in Old Town Alexandria, VA where the workshop is held. He currently serves as the President on the National Board of Directors for the International Society of Appraisers. He is also the creator and editor of the Journal of Advanced Appraisal Studies.

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